Regional LNG: CNOOC signs gas supply deal with Petronas

China National Offshore Oil Corp (CNOOC)said Monday it has concluded a supply deal with Malaysia's Petronas that could set a new regional pricing benchmark for natural gas, the Financial Times reported.

Citing Fu Chengyu, chairman and chief executive of CNOOC, the newspaper said the company has concluded an agreement with Petronas to supply liquefied natural gas (LNG) to a terminal in Shanghai, the first LNG supply agreement signed by China since 2002.

Fu did not disclose pricing terms of the agreement, which would be key to assessing its impact on Asia's LNG market, but he noted that it could become a new standard for the region if Petronas treated the deal as a benchmark.

Rising global prices for the commodity have made deals uneconomic for the Chinese market, where the gas price is fixed.

The Shanghai terminal is scheduled to open in 2008, the newspaper said.

Citing industry officials, the newspaper added that the CNOOC-Petronas deal has been priced at about 5-6 usd per mln British thermal units, above the price paid by CNOOC with Australian and Indonesian suppliers in 2002, but well below the 9-11 usd market price for gas delivered to north Asia.

It is not clear why Petronas would agree to sell LNG to CNOOC at a price below the prevailing market rate, but it may signify a longer-term relationship between the countries, the newspaper said.(*)